XML 22 R12.htm IDEA: XBRL DOCUMENT v3.23.3
Acquisition and divestiture
9 Months Ended
Sep. 30, 2023
Business Combinations [Abstract]  
Acquisition and divestiture

2. Acquisition and divestiture

Acquisition

On April 1, 2022, M&T completed the acquisition of People's United. Through subsidiaries, People's United provided commercial banking, retail banking and wealth management services to individual, corporate and municipal customers through a network of branches located in Connecticut, southeastern New York, Massachusetts, Vermont, New Hampshire and Maine. Following the merger, People's United Bank, National Association, a national banking association and a wholly owned subsidiary of People's United, merged with and into M&T Bank, the principal banking subsidiary of M&T, with M&T Bank as the surviving entity. The results of operations acquired from People's United have been included in the Company's financial results since April 1, 2022.

Pursuant to the terms of the merger agreement dated February 22, 2021, People’s United shareholders received consideration valued at .118 of an M&T common share in exchange for each common share of People’s United. The purchase price totaled approximately $8.4 billion (with the price based on M&T’s closing price of $164.66 per share as of April 1, 2022). M&T issued 50,325,004 common shares in completing the transaction. Additionally, People’s United outstanding preferred stock was converted into new shares of Series H Preferred Stock of M&T. The acquisition of People's United expanded the Company's geographical footprint and management expects the Company will benefit from greater geographical diversity and the advantages of scale associated with a larger company.

 

2. Acquisition and divestiture, continued

The People’s United transaction has been accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and preferred stock converted were recorded at estimated fair value on the acquisition date. The consideration paid for People’s United common equity and the amounts of identifiable assets acquired, liabilities assumed and preferred stock converted as of the acquisition date follows:

 

 

(In thousands)

 

Consideration:

 

 

 

Common stock issued (50,325,004 shares)

 

$

8,286,515

 

Common stock awards converted

 

 

104,810

 

Cash

 

 

1,824

 

Total consideration

 

 

8,393,149

 

 

 

 

 

Net assets acquired:

 

 

 

Identifiable assets

 

 

 

Cash and due from banks

 

 

395,747

 

Interest-bearing deposits at banks

 

 

9,193,346

 

Investment securities

 

 

11,574,689

 

Loans and leases

 

 

35,840,648

 

Core deposit and other intangible assets

 

 

261,000

 

Other assets

 

 

2,979,388

 

Total identifiable assets acquired

 

 

60,244,818

 

Liabilities and preferred stock

 

 

 

Deposits

 

 

52,967,915

 

Borrowings

 

 

1,389,012

 

Other liabilities

 

 

1,142,387

 

Total liabilities assumed

 

 

55,499,314

 

Preferred stock

 

 

260,600

 

Total liabilities and preferred stock

 

 

55,759,914

 

Net assets acquired

 

 

4,484,904

 

Goodwill

 

$

3,908,245

 

GAAP requires loans and leases obtained through an acquisition that have experienced a more-than-insignificant deterioration in credit quality since origination be considered PCD. The Company considered several factors in the determination of PCD loans, including loan grades assigned to acquired commercial loans and leases and commercial real estate loans utilizing the Company's loan grading system and delinquency status and history for acquired loans backed by residential real estate. For PCD loans and leases, the initial estimate of expected credit losses of $99 million was established through an adjustment to increase both the initial carrying value and allowance for credit losses. GAAP also provides that an allowance for credit losses on loans acquired, but not classified as PCD, also be recognized above and beyond the impact of forecasted losses used in determining fair value. Accordingly, the Company recorded $242 million of provision for credit losses for non-PCD acquired loans and leases at the acquisition date. The following table reconciles the unpaid principal balance to the fair value of loans and leases at April 1, 2022:

 

PCD

 

 

Non-PCD

 

 

 

(In thousands)

 

 

Unpaid principal balance

$

3,410,506

 

(a)

$

32,896,454

 

 

Allowance for credit losses at acquisition

 

(99,000

)

(a)

 

 

 

Other discount

 

(106,814

)

 

 

(260,498

)

(b)

Fair value

$

3,204,692

 

 

$

32,635,956

 

 

 

(a)
The unpaid principal balance and allowance for credit losses at acquisition is net of charge-offs of $33 million recognized on the PCD loans.
(b)
Includes approximately $242 million of principal balances not expected to be collected.

 

2. Acquisition and divestiture, continued

In connection with the acquisition, the Company recorded approximately $3.9 billion of goodwill, which represents the excess of the purchase price over the fair value of the net assets acquired, and $261 million of core deposit and other intangible assets. The core deposit and other intangible assets are being amortized over periods of three to seven years.

The following table presents certain pro forma information as if People’s United had been acquired on January 1, 2021. These results combine the historical results of People’s United into the Company’s Consolidated Statement of Income and, while adjustments were made for the estimated impact of certain fair valuation adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place as indicated. For example, merger-related expenses noted below are included in the periods where such expenses were incurred. Additionally, the Company expects to achieve operating cost savings and other business synergies as a result of the acquisition which are not reflected in the pro forma amounts that follow:

 

 

Pro forma

 

 

 

Nine months ended September 30, 2022

 

 

 

(In thousands)

 

Total revenues (a)

 

$

6,134,400

 

Net income

 

 

1,399,913

 

 

(a)
Represents the total of net interest income and other income.

In connection with the People’s United acquisition, the Company incurred merger-related expenses related to systems conversions and other costs of integrating and conforming acquired operations with and into the Company. Those expenses consisted largely of professional services, temporary help fees and other costs associated with actual or planned systems conversions and/or integration of operations and the introduction of the Company to its new customers; costs related to termination of existing contractual arrangements for various services; initial marketing and promotion expenses designed to introduce M&T Bank to its new customers; severance (for former People’s United employees); travel costs; and other costs of completing the transaction and commencing operations in new markets and offices. The Company did not incur any People's United merger-related expenses during the three and nine months ended September 30, 2023. Merger-related expenses incurred in the three and nine months ended September 30, 2022 totaled approximately $53 million and $293 million, respectively, and consisted predominantly of professional services, including legal expenses and technology-related activities to prepare for planned integration efforts, and severance for former People's United employees. The Company also recognized a $242 million provision for credit losses on acquired loans that were not deemed to be PCD on April 1, 2022.

Divestiture

On December 19, 2022 the Company announced that it had entered into a definitive agreement to sell its CIT business to a private equity firm. The transaction was completed on April 29, 2023 and resulted in a pre-tax gain of $225 million that has been included in other revenues from operations in the Consolidated Statement of Income for the nine-month period ended September 30, 2023. Prior to the sale, the CIT business contributed $60 million and $121 million to trust income in the nine months ended September 30, 2023 and 2022, respectively. After considering expenses, the results of operations from the CIT business were not material to the Company's consolidated results of operations in those periods.